Data

Date:: 07-04-1999
Country:: Arbitral Award
Number:
Court:: CIETAC China International Economic and Trade Arbitration Commission
Parties:: Unknown

Keywords

LACK OF CONFORMITY OF GOODS (ART. 35 CISG) WITH RESPECT TO THE REQUIREMENTS AGREED UPON IN THE CONTRACT

SELLER’S LIABILITY FOR LACK OF CONFORMITY AFTER PASSING OF RISK (ART. 36 CISG) IN CASES WHERE LACK OF CONFORMITY EXISTED BEFORE PASSING OF RISK

Abstract

A U.S. seller and a Chinese buyer entered into a contract for the sale of PVC suspension resin. A dispute arose between the parties concerning the mislabeling of the goods which had caused the buyer’s end user to reject the goods and, as a consequence, the buyer’s obligation to pay the damages provided for in the third party contract.
Lacking an express choice of applicable law by the parties, the Arbitral Tribunal applied the Law of the People’s Republic of China on Economic Contracts Involving Foreign Interests (by virtue of the principle of closest relation with the contractual performance) and CISG, as China and the United States are both contracting countries. The Tribunal made also reference to the Incoterms 1990, since the parties had chosen CFR as the delivery term in the contract.

As to the merits, the Arbitral Tribunal rejected seller’s argument that under CFR the risk of loss passed to the buyer at the time when the goods passed over the ship’s rail at the port of shipment, so any damages or losses happened thereafter should be recovered from the carries or the insurer. The Arbitral Tribunal, applying art. 35 CISG held that the seller was in breach of contract because the mislabeling amounted to non conformity, and according to art. 36(1) CISG, the non conformity existed before the passing of risk occurred. As a consequence, the Arbitral Tribunal awarded buyer damages in the amount sought.

Fulltext

Joint translation project:
New York University School of Law
and Pace University School of Law

China International Economic & Trade Arbitration Commission
CIETACC (PRC) Arbitration Award
PVC suspension resin case (7 April 1999)

Translation [*] by Fan Wei [**]

Edited by Yan Tianhuai [***]

According to the arbitration clause in Sales Contract No. 97CPSTI-(D)019 (hereinafter, "Contract No. 019") signed by and between the Claimant (hereinafter, "[Buyer]"), China Shantou XXX Import & Export Company, and the Respondent (hereinafter, "[Seller]"), America XXX Co. Ltd., as well as the written arbitration application submitted by the [Buyer], the Shenzhen Sub-Commission of China International Economic & Trade Arbitration Commission (CIETAC) (hereinafter, "Shenzhen Sub-Commission") accepted this case on 16 July 1998.

The total amount of the claims is less than RMB 500,000, thus, according to the Arbitration Rules of CIETAC (effective as of 10 May 1998) (hereinafter, "Arbitration Rules"), a summary arbitration procedure shall be applied to this case.

As the parties failed to jointly appoint a sole arbitrator or to jointly entrust the Chairman of CIETAC to appoint such a sole arbitrator, the Chairman of CIETAC, at his discretion, appointed Ms. P as the sole arbitrator pursuant to Article 65 of the Arbitration Rules. An Arbitration Tribunal was formed by the arbitrator on 20 August 1998.

After carefully examined the [Buyer]'s application, the [Seller]'s written defense and other related materials submitted by both parties, the Arbitration Tribunal held a hearing on 7 October 1998. The [Seller]'s and the [Buyer]'s representatives attended the hearing, made oral statements and arguments, and answered the Arbitration Tribunal's questions. After the hearing, each party submitted supplementary written material, which was forwarded to the other party by the Secretariat of the Shenzhen Sub-Commission.

Due to the complexity of this case, as requested by the Arbitration Tribunal and approved by the Secretary General of the Shenzhen Sub-Commission, the award date of this case was postponed to 7 April 1999.

The Arbitration Tribunal rendered its award on 7 April 1999. The facts of the case and the Arbitration Tribunal's opinions and the award are as follows:

I. FACTS

The [Buyer] and the [Seller] entered into Contract No. 019 in Shantou on 29 April 1997. The contract provides, among other conditions, that:

1. The [Buyer] agrees to purchase from the [Seller] 200 tons of PVC Suspension Resin produced by U.S. Formosa Plastics Corp. at a unit price of RMB 790 /ton CFR Huangpu Port, China. The total price of the goods is RMB 158,000. Three percent more or less in quantity and total price is allowed, subject to the [Seller]'s discretion.

2. The goods under this contract shall be packed in the producer's standard 25-kilogram packing bags and loaded in 20-foot containers. The port of shipment shall be a U.S. major port and the port of destination shall be Huangpu Port, China. The shipping mark is GP97IA-035/No.1-UP, and the date of shipment is 20 June 1997.

3. The Buyer shall make payment through a letter of credit (hereinafter, the "L/C") payable within 90 days following the issuance of bill of lading (hereinafter, the "B/L").

4. The parties agree that the goods shall be inspected by Guangdong Import and Export Commodities Inspection Bureau (hereinafter, "Guangdong Inspection Bureau") within 90 days after their arrival at the destination port, and that the inspection certificate issued by Guangdong Inspection Bureau is final and binding upon both parties. After Guangdong Inspection Bureau's inspection, should the quality, quantity or weight of the goods be found not in conformity with the contract, the [Buyer] may reject the goods and/or be entitled to claim compensation against the [Seller], except for losses covered by the insurer or the carrier. The [Seller] shall withdraw the defective goods and compensate the [Buyer] for the payment for the goods, cost of transportation, insurance fee, storage fee, inspection fee, accrued interest, and other costs and expenses.

5. The notify party and consignee is China XXX Import & Export Company Guangzhou Branch.

6. Any dispute arising from the performance of this contract or in connection with this contract shall be submitted to CIETAC or its sub-commission in Shanghai or Shenzhen for arbitration which shall be conducted in accordance with the then effective Arbitration Rules of CIETAC provided no settlement can be reached by parties through negotiation.

Disputes arose from the performance of Contract No. 019 and the [Buyer] submit an application to the Shenzhen Sub-Commission for arbitration.

[Buyer]'s claims

The [Buyer]'s claims are as follows:

1. The [Seller] should compensate the [Buyer] for the economic loss amounting to RMB 311,046.88, plus interest in the amount of RMB 19,585.22 accrued from 9 September 1997 to 9 May 1998 due to the [Seller]'s breach of Contract No. 019; and

2. The [Seller] should bear the arbitration fee, the [Buyer]'s attorneys' fee and other related costs and expenses.

The [Buyer]'s claims are based on the following facts and reasons:

After conclusion of Contract No. 019, the [Buyer] was informed that the [Seller] had shipped the cargo from the Port of Houston, U.S. on 16 June 1997. With this knowledge, the [Buyer] signed a contract with its end user, Guangdong Puning City Stone Bridge Daily Plastics Manufacturer, on 23 June 1997 providing for the resale of the aforesaid goods at a unit price of RMB 8,100 /ton.

The goods arrived at Huangpu Port, China on 16 July 1997. The [Buyer] discovered that the description printed on the packages of the goods did not comply with Contract No. 019. After an inspection carried out by Guangdong Inspection Bureau, it was revealed that the specification of the goods that were delivered was "H622" instead of "F622" as required by Contract No. 019. Furthermore, due to improper packaging, there was a leakage of the goods over 875 kilograms, and the [Buyer] had to repack the damaged portion of the goods. On 9 September 1997, the [Buyer] sent a letter to the [Seller] to request compensation, but the [Seller] did not respond to this request over a significant period of time. Due to the [Seller]'s breach of Contract No. 019, the [Buyer] suffered losses amounting to RMB 311,046.88 (the sum was fixed as RMB 304,031.78 in the documents submitted to the Arbitration Tribunal by the [Buyer] after the hearing). The losses were itemized as follows:

(1) Due to the [Seller]'s breach of Contract No. 019, the [Buyer]'s end user, Guangdong Puning City Stone Bridge Daily Plastics Manufacturer, refused to accept the goods. The [Buyer] had to resell the goods to other customers and suffered a loss of price difference amounting to RMB 200,000 (The contract price between the [Buyer] and Guangdong Puning City Stone Bridge Daily Plastics Manufacturer for F622 PVC Suspension Resin was RMB 8,100 /ton. Due to the lack of conformity of the goods delivered by the [Seller], the [Buyer] had to resell the goods to other customers at a price of RMB 7,100 /ton and suffered a loss of RMB 1,000 per ton and RMB 200,000 in total). In supplementary documents submitted to the Arbitration Tribunal after the hearing, the [Buyer] modified the sum to RMB 193,582.50;

(2) Due to the [Seller]'s breach of Contract No. 019, the [Buyer] was unable to perform the resale contract with Guangdong Puning City Stone Bridge Daily Plastics Manufacturer and had to pay the latter liquidated damages of RMB 8,100.00;

(3) The leakage of the goods caused by improper packaging involved 875 kilograms; calculated at the unit price, the loss amounted to US $619.25, equivalent to RMB 5,737.38 (US $1.00 = RMB 8.30). In its supplementary documents submitted to the Arbitration Tribunal after the hearing, the [Buyer] modified the sum to RMB 5,139.78;

(4) The [Buyer]'s cost to repackage the broken portion of the goods was RMB 14,459.50; and

(5) The inspection fee paid by the [Buyer] was RMB 9,850.00.

In addition to the above losses, the [Buyer]'s attorneys' fee was RMB 10,000.

[Seller]'s position

The [Seller] raised the following defenses:

1. The inspection certificates submitted to the Arbitration Tribunal by the [Buyer] could not be adopted as evidences supporting its claims. After conclusion of Contract No. 019, the [Seller] had fulfilled his contractual obligation of delivery. The two inspection certificates issued, respectively, on 19 August 1997 and 4 September 1997 by the Guangdong Inspection Bureau, showed that the contract number is GP97IA-035 (hereinafter, "Contract No. 035") rather than the Contract No. 019 under which the parties were in dispute in this case. Put in other words, the [Buyer] failed to submit any inspection certificate relevant to this case. Moreover, the discrepancy stated in the two inspection certificates is the non-conformity in the type of goods required by Contract No. 035 rather than a non-conformity in the quality of the goods.

2. The [Seller] was not liable for the damages claimed by the [Buyer]. The [Buyer] failed to produce any evidence to prove any damages incurred under Contract No. 019. According to Contract No. 019, both parties chose CFR as the term under which the [Buyer] should purchase insurance covering the goods from the port of shipment to the port of destination and bear the risk of loss of or damage to the goods from the time they passed the ship's rail at the port of shipment. Also, the goods were loaded in containers during the maritime transportation, so there was no likelihood that the packages could break. Also, as the commodity inspections were conducted in a warehouse located in Foshan, China, it was very likely that the damage happened during the transportation from the port of discharge to the Foshan warehouse. Therefore, the damages to the goods had nothing to do with the [Seller].

3. The method employed by the [Buyer] to calculate the damages is not supported by law and the [Buyer] wrongfully calculated the damages.

(1) The loss of price difference of RMB 200,000

The [Seller] delivered the goods properly, so the loss of price difference suffered by the [Buyer] in domestic resale had nothing to do with the [Seller]. Furthermore, the [Buyer] did not give the reason for the price reduction, nor did [Buyer] provide the evidence to prove whether the price reduction was reasonable or not in the light of the market situation. In addition, the [Buyer] made a mistake in its calculation of the total loss of price difference which should be RMB 193,582.50 rather than RMB 200,000 (Note by the Arbitration Tribunal: The [Buyer] has corrected the sum in the documents submitted to the Arbitration Tribunal after the hearing.)

(2) Liquidated damages of RMB 81,000

Based on the above reasons, the liquidated damages paid by the [Buyer] to its end user had nothing to do with the [Seller]. Also, the [Buyer] stated that its payment for the liquidated damages was made in cash, but presented to the Arbitration Tribunal only a receipt rather than formal invoice. The validity of such receipt to be used as evidence is questionable.

(3) The damage caused by the leakage of the goods due to improper packaging

As stated above, the [Seller] should not be liable for the damages to the goods. Again, the [Buyer] made mistake in calculating the damages: US $619.25 should be equivalent to RMB 5139.775 converted at the exchange rate of 1:8.30 (Note by the Arbitration Tribunal: The [Buyer] corrected this sum after the hearing).

(4) The cost of repackaging

As stated above, the [Seller] should not be liable for the damage to the goods, nor be liable for the cost of repackaging the broken bags.

(5) Inspection fee of RMB 9,850

The [Seller] should not bear the inspection fee for the reason that the inspected goods were not the same under Contract No. 019. Furthermore, the inspection fee requested by the [Buyer] consisted of RMB 6,571 paid for inspecting the goods on 19 August 1997 and RMB 3,279 paid for inspecting the same goods on 4 September 1997 - the same inspection conducted twice on the same goods; thus the second inspection constituted a repeated inspection and the second inspection fee is unreasonable.

(6) Arbitration fee, attorneys' fee of RMB 10,000, and accrued interest

The [Buyer] submitted the case to the Arbitral Tribunal for arbitration without sound legal as well as factual grounds, so it should bear all the expenses incurred thereof. Moreover, the [Buyer] failed to present the invoice of its attorneys' fee, and its calculation of the interest was legally groundless.

After the hearing, both parties presented the Arbitration Tribunal with supplementary materials

[Buyer]'s supplementary claims

The [Buyer] made the following supplementary claims:

1. The [Seller]'s delivery of the goods "H622" instead of the goods "F622" required by Contract No. 019 constituted a breach of contract, which the [Seller] never denied. The inspection certificates issued by Guangdong Inspection Bureau are sufficient evidence to prove that the type of the goods delivered by the [Seller] is "H622". Although the buyers listed on both inspection certificates are China XXX Import & Export Company Guangzhou Branch instead of the [Buyer], the quantity, weight, invoice number, name of ship, voyage, port of shipment, port of destination, and the number of the B/L indicated in the two inspection certificates fully conform to those indicated in the shipping documents presented by the [Seller] to the [Buyer]. Such conformities show that the goods under the two inspection certificates are the very ones that the [Seller] delivered to the [Buyer]. The non-conformities in buyer's name and contract number showed in the two inspection certificates are resulted from the fact that the [Buyer], the [Seller] and China XXX Import & Export Company Guangzhou Branch had agreed that in order to declare the goods at the Customs in Huangpu, China, Contract No. 035 had to be signed by and between the [Seller] and China XXX Import & Export Company Guangzhou Brach. Contract No. 019 provides that the notify party and consignee of the goods is China XXX Import & Export Company Guanzhou Branch; the agreed shipping mark under Contract No. 019 indicates the number of Contract No. 035; the B/L is made to blank order; the notify party shown on the B/L is China XXX Import & Export Company Guangzhou Branch; and the shipping mark shown on the B/L indicates the number of Contract No. 035. The forgoing evidence shows that the [Buyer], the [Seller] and China XXX Import & Export Company Guangzhou Branch agreed to declare at Huangpu Customs the goods under Contract No. 019 by China XXX Import & Export Company Guangzhou Branch with Contract No. 035. Therefore, the [Seller] should not question the validity of the inspection certificates.

2. The evidence in this case sufficiently prove that the goods inspected by Guangdong Inspection Bureau are the same as the goods delivered by the [Seller] under Contract No. 019 and that the type of the goods is "H622" rather than "F622" required by Contract No. 019. The [Seller] admitted that goods it delivered are "H622", but stressed only that the two types of the goods have the same quality.

3. The [Seller] should be liable for the direct economic loss caused by its breach of Contract No. 019. As the goods were shipped in containers from container yard to container yard, pursuant to Article 27(1)(ii) of the Provisions of the People's Republic of China on the Administration of Maritime International Container Transport, as long as the containers and seals are in good condition at the time when the consignee receives the goods, the shipper shall be liable for any damages to the goods in the container. According to the written testimonies presented by China XXX Import & Export Company Guangzhou Branch as well as its Lan Stone warehouse, the containers and seals remained intact upon their arrival at the warehouse, therefore, the [Seller] should be liable for the damages to the goods. The inspection certificates also indicate that the damages to the goods resulted from improper packaging. Under CFR, the dividing line of the risk of loss of or damages to the goods between the buyer and the seller is the rail of the ship at the port of shipment; however, according to trade practices, the seller is still liable for any lack of conformity which exists at the time when the risk passes to the buyer or which occurs after that time due to seller's breach of any of its obligations, even though such lack of conformity becomes apparent only after that time. Similar provisions are found in Article 36 and Article 66 of United Nations Convention on Contracts for the International Sale of Goods (CISG). As both China and United States are Contracting States of the CISG and the [Buyer] and the [Seller] did not exclude the application of the CISG to Contract No. 019, the relevant provisions of the CISG are applicable hereto. Thus, the [Seller] should compensate the [Buyer] for the loss suffered under Contract No. 019.

[Seller]'s supplementary defenses

The [Seller] raised the following supplementary defenses:

1. The [Seller] had fulfilled its obligation of delivery under Contract No. 019. The [Buyer] failed to provide any evidence to prove that the [Seller] did not perform Contract No. 019 and that the goods were improperly packaged.

2. Contract No. 035 is a false and illegal contract. The [Seller] never signed Contract No. 035 with China XXX Import & Export Company Guangzhou Branch, nor was Contract No. 035 agreed by and among the three parties. The inspection certificates for the goods under Contract No. 035 cannot be adopted as evidence in this case. Contract No. 035 is different from Contract No. 019 because the goods under the latter bear the shipping mark GP97LA-035/No.1-UP while the goods under the former do not.

[Buyer]'s supplementary evidence and explanations

On 20 March 1999, the [Buyer] provided supplementary evidence as well as corresponding explanations. The contents are as follows:

Supplementary Evidence One: Contract No. 035 concluded on 29 April 1997 by and between the [Seller] and China XXX Import & Export Company Guangzhou Branch.

The contents of Contract No. 035 are the same as those of Contract No. 019. This fact is also supported by the statement presented to the Arbitration Tribunal by China XXX Import & Export Company Guangzhou Branch. This evidence indicates that the goods under the inspection certificates issued by Guangdong Inspection Bureau are the very goods under Contract No. 019.

Supplementary Evidence Two: The first voyage B/L covering the shipment of the goods under Contract No. 019 from USA to Huangpu, China via Hong Kong.

The first voyage B/L was issued by HANJIN SHIPPING CO., LTD. (hereinafter, "HANJIN") and numbered HJSCHOUA12405002. It shows that the shipper of the goods is UNITCARGO CONTAINER LINE, INC. (hereinafter, "UCL"), the cargo space booking number is HOUA519955, and the corresponding export reference is UCL 6-97-625. The port of shipment, port of destination, vessel name and voyage, description of goods, specification, quantity, weight and the packaging indicated in the first voyage B/L are in full conformity with the B/L issued by UCL, which was submitted to the Arbitration Tribunal by the [Buyer] at the beginning of the hearing of this case, except that the consignee indicated in the first voyage B/L is Hong Kong GULF AGENCY COMPANY. In comparison of the first voyage B/L with the B/L issued by UCL, it can be seen that UCL is just a contracting carrier while the actual carrier is HANJIN. The goods were packed, calculated and sealed in UCL's containers by the [Seller] and were delivered to UCL, who then delivered the goods as a shipper to the first actual carrier, HANJIN. UCL issued the B/L 6-97-625 to the [Seller] on 16 June 1997 after the first actual carrier HANJIN loaded the goods onto HANJIN's vessel on 13 June 1997.

Supplementary Evidence Three: The second voyage B/L covering the shipment of the goods under Contract No. 019.

The second voyage B/L was issued by JUNGJIN SHIPPING CO., LTD. (hereinafter, "JUNGJIN) and numbered HKHP983127-09. It shows that the shipper is HANJIN, the vessel name and voyage number are SUIHANG 983127N, the goods were transshipped from HANJIN BEIJING Vessel No. 5 in Hong Kong, the consignee is "to order of the holder of the original first voyage B/L No. HJSCHOUA12405002", and the notify party is Guangzhou XXX Multimode Transportation Service Company. The [Buyer] entrusted China XXX Import & Export Company Guangzhou Branch to present this second voyage B/L to Guangdong Huangpu Warehouse & Terminal Co., who actually handled the dock matters with this second voyage B/L on the [Buyer]'s behalf.

Supplementary Evidence Four: The working record kept by Mr. Huang ZengYuan, an employee of China XXX Import & Export Company Guangzhou Branch in charge of handling the goods under Contract No. 019.

The record shows that the discrepant documents were returned and ordered for amendment upon receipt, the original invoice and packing list were returned on 17 July 1997 and the original B/L was returned the next day. It was Mr. Huang ZengYuan who exchanged for the first voyage B/L issued by HANJIN with the B/L issued by GULF AGENCY COMPANY (the Hong Kong agent of HANJIN, the actual carrier of first voyage) from XXX Company, then exchanged for the second voyage B/L with the first voyage B/L from JUNGJIN and entrusted the Guangdong Huangpu Warehouse & Terminal Co. to handle the dock matters. The forgoing facts indicate that China XXX Import & Export Company Guangzhou Branch received the goods under Contract No. 019 with the first voyage B/L issued by HANJIN and the second voyage B/L issued by JUNGJIN as well as attached documents instead of the B/L No. 6-97-625 which was presented to the Arbitration Tribunal by the [Buyer] by mistake at the beginning of the hearing of this case without knowledge that the B/L No.6-97-625 had been returned for amendment. So, the valid shipping documents with respect to the goods under Contract No. 019 are the first and second voyage B/Ls as well as the attached invoice and packing list.

Supplementary Evidence Five: The valid packing list and weight memo of the goods under Contract No. 019.

Careful contrast this packing list and the first and second voyage B/Ls with the B/L No. 6-97-625 which had been returned during the transshipment and was mistakenly presented to the Arbitration Tribunal by the [Buyer] at the beginning of the hearing of this case shows that the goods under Contract No. 019 bore no shipping mark at the time they were loaded in the containers. This fact is in conformity with the "NO MARK" statement on the inspection certificates issued by Guangdong Inspection Bureau.

Supplementary Evidence Six: The fax given by the contracting carrier UCL to GULF AGENCY COMPANY (the agent of the actual first voyage carrier NANJIN) and the fax given by GULF AGENCY COMPANY to XXX Company, the notify party shown on the second voyage B/L.

This evidence shows that UCL once faxed GULF AGENGY COMPANY requiring "make certain cargo is not released until original UCL B/L has been presented" and that GULF AGENCY COMPANY forwarded the first voyage B/L to the notify party XXX Company. It further shows that the B/L No.6-97-625 issued by UCL was returned together with other related documents for amendment and that the first voyage B/L could be obtained only from XXX Company. These facts are in coincidence with Mr. Hunag Zeng Yuan's record mentioned in Supplementary Evidence Four, above..

Supplementary Evidence Seven: The cargo receipt of SUIHANG SHIP Voyage No. 983127N provided by the actual second voyage carrier JUNGJIN.

This cargo receipt shows that "NO MARK" was entered under the shipping mark column and no unusual remark was made on it except that the container number HJCU8900916/06270 under the container number & seal column was circled and noted that it was different from the number showed on the packing list mentioned in Supplemental Evidence Five. This fact indicates that the containers holding the goods under Contract No. 019 and their seals were in good condition.

Supplementary Evidence Eight: The warehouse record entered by China XXX Import & Export Company Guangzhou Branch when taking delivery of the goods from the warehouse of Guangdong Huangpu Warehouse & Terminal Co.

This record indicates that the twelve containers holding the goods under Contact No. 019 were taken away from the warehouse in good condition, otherwise they would not have been allowed to be taken away nor would they have been accepted by China XXX Import & Export Company Guangzhou Branch.

[Buyer]'s explanation of supplementary evidence provided

The [Buyer] asserted that the above supplementary evidence shows that:

1. The goods under the inspection certificates issued by Guangdong Inspection Bureau with China XXX Import & Export Guangzhou Branch as applicant and with Contract No. GP97IA-035 are exactly the same goods under Contract No. 019, which actually bear no shipping mark, and the shipping documents with respect to the goods were returned for amendment during the transportation to reflect that there were no shipping marks on the goods; and

2. The containers holding the goods under Contract No.019 and their seals were in good condition when they arrived at Huangu Port, China based on the following reasons:

(1) No negative remark was made on the cargo receipt issued by JUNGJIN, except for the circle and note for the mistake in one container number;

(2) The goods were taken from the warehouse of Guangdong Huangpu Warehouse & Terminal Co. in full containers and in good condition;

(3) There is an Official Customs Seal on the second voyage B/L showing that goods were cleared with the Customs authorities. According to the Customs' procedure, if there was any damage to the containers or the seals happened before the Customs' inspection, the goods held in the containers would not have been cleared through Customs;

(4) As Guangdong Huangpu Warehouse & Terminal Co. stated, it usually enters remarks on the warehouse receipt only when there is an unusual condition with the container or seal during the handing-over of the cargo and makes no remark if the container and the seal are in normal condition. Such practice is not strictly in compliance with the Provisions of the People's Republic of China on Administration of Maritime International Container Transport which requires both the party handing over the goods and the party receiving the goods to make positive remarks if the container and seal are in good condition. Therefore, Guangdong Huangpu Warehouse & Terminal Co. could not provide the record signed by both the party handing over the goods and the party receiving the goods; and

(5) The [Seller] admitted more than once during the hearing that the goods it delivered are "H622" type PVC Suspension Resin. According to the Civil Procedure Law of People's Republic of China, the [Buyer] has no burden of producing further evidence to prove any fact the [Seller] admitted.

[Seller]'s rebuttal to [Buyer]'s supplementary evidence and explanations

On 31 March 1999, the [Seller] presented the Arbitration Tribunal with the following rebuttal to the [Buyer]'s supplementary evidences as well as the corresponding explanations:

1. Rebuttal to [Buyer]'s Supplementary Evidence One

The [Buyer] at one time submitted a Statement of Condition to the Arbitration Tribunal certifying that the fax copy of Contract No. 035 had been discarded because it was illegible after a long period of time. But now the [Buyer] forwards to the [Seller] a copy of Contract No. 035 through the Arbitration Tribunal. This leads the [Seller] to doubt the truthfulness and validity of this document. The [Seller] contends that the Arbitration Tribunal should not adopt such evidence that contradicts that provided by the [Buyer] before.

Taking a step back, even if Contract No. 035 does exist, according to its contents provided by the [Buyer], the parties to Contract No.035 should be the [Seller] and China XXX Import & Export Guangzhou Branch rather than the [Buyer]. Thus, the [Buyer] has no standing to submit this arbitration claim against the [Seller].

2. The B/L No. 6-97-625 issued by UCL and the inspection certificates

The [Seller] requests the Arbitration Tribunal to pay adequate attention to the fact that the [Buyer] now alleges that there are errors on the B/L No. 6-97-625 issued by UCL, which [Buyer] presented to the Arbitration Tribunal by mistake. However, the inspection certificate dated 19 August 1997 presented by the [Buyer] to the Arbitration Tribunal at the beginning of the hearing shows that the B/L number is exactly the same number 6-97-625 and marked with " No Mark," while another inspection certificate dated 4 September 1997 shows no B/L number (though the B/L number is a necessary element of an inspection certificate). Consequently, the [Seller] asserts that according to the [Buyer]'s supplementary evidence and explanations that the B/L No. 6-97-625 was submitted to the Arbitration Tribunal by mistake, then the inspection certificates based on the same B/L should not be used as evidence to support the [Buyer]'s claims.

Furthermore, the [Seller] argues that the two inspection certificates submitted by the [Buyer] are not quality inspection certificates at all, since no analysis of the ingredients of the goods was shown on the certificates to certify whether the goods are in conformity with the "F622" standard or not. Therefore, they cannot be used as evidence to prove the [Seller]'s non-conforming delivery of the goods.

What is more, the [Buyer] stated repeatedly that the B/L No. 6-97-625 issued by UCL had been returned for amendment and provided supplementary evidence to prove its statement. However, from the [Seller]'s point of view, such statement is groundless. As mentioned in the [Buyer]'s Supplementary Evidence Six, UCL stated clearly in its fax to GULF AGENCY COMPANY (the agent of the actual first voyage carrier NANJIN): "MAKE CERTAIN CARGO IS NOT RELEASED UNTIL UCL B/L HAS BEEN PRESENTED!!" This statement means that the goods should be released only against the original UCL B/L, without request that the B/L should be returned for amendment. According to the documents provided by the [Buyer], the B/L issued by GULF AGENCY COMPANY was used in taking delivery of the goods (see the [Buyer]'s Supplementary Evidence Four), but GULF AGENCY COMPANY was not the agent of UCL nor did it have the rights to issue and amend the B/L on behalf of UCL. Based on the above reasons, the [Seller] considers that the goods the [Buyer] took delivery on with the B/L issued by GULF AGENCY COMPANY are not the ones under Contract No. 019.

3. The first voyage B/L presented to the Arbitration Tribunal by the [Buyer] is neither consistent with B/L No. 6-97-625 nor does it satisfy the requirement of Contract No. 019, therefore it cannot be used as evidence to prove that the goods under the first voyage B/L are the same as under Contract No. 019.

The [Buyer] alleged that UCL was the contracting carrier and HANJIN was the actual carrier, and that the port of shipment, port of destination, vessel name and voyage, description of goods, specification, weight, quantity, packaging, etc. shown on the B/L issued by HANJIN are same as those on the B/L issued by UCL. The [Buyer]'s above allegations are untrue.

By contrasting the two B/Ls, it can be seen that the B/L issued by UCL shows the shipping mark GP97IA-035/No.1-UP while the B/L issued by HANJIN shows neither shipping mark nor container number; especially, the date of loading shown on the two B/Ls are different. Considering such significant differences between the two B/Ls, it cannot be claimed that the two B/Ls are the same in contents.

Also, the first voyage B/L issued by HANJIN does not conform to Contract No. 019 which clearly provides that the shipping mark is GP97IA-035/No.1-UP. Therefore, the first voyage B/L issued by HANJIN cannot be adopted as valid evidence to prove that the goods under it are the same as under Contract No. 019.

4. The second voyage B/L issued by JUNGJIN and presented to the Arbitration Tribunal by the [Buyer] contradicts the related evidence.

There are detailed descriptions about the container number on the second voyage B/L issued by JUNGJIN and presented to the Arbitration Tribunal by the [Buyer]. However, the packing list mentioned by the [Buyer] in its Supplementary Evidence Five also provides descriptions of the container number. Furthermore, the [Buyer] claimed that the packing list is valid evidence. However, the container number shown on the second voyage B/L is not in coincidence with those shown on the packing list. Therefore, the container number showed on the second voyage B/L must be wrong. The wrong container number on the B/L must have resulted in the [Buyer] taking delivery of the wrong goods, for which the [Seller] should not be liable.

5. Handing-over of the containers

The [Buyer] has admitted that it was unable to provide the evidentiary documents regarding whether the seals remained intact during the handing-over of the goods. It can therefore be presumed that the [Seller] handed over conforming goods at the container yard of the destination port. Article 26 of the Provisions of the People's Republic of China on the Administration of Maritime International Container Transport provides that: "The liabilities for the damages to or losses of containers or goods in containers, before the handing-over the containers or goods, shall be borne by the handing-over party, after the handing-over the containers or goods, shall be borne by the receiving party." Therefore, if there was any damages to or losses of goods, the [Buyer] should make a claim for compensation against the party who was liable, rather than the [Seller].

II. OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

Because the parties did not make a choice of the applicable law in Contract No. 019, the Arbitration Tribunal holds that the Conflict of Law Rules of the People's Republic of China, the country in which the arbitration venue is situated, shall be applied to ascertain the applicable law of this case. In accordance with Article 5 of the Foreign Economic Contract Law of the People's Republic of China, the contract shall be governed by the law of the country with which it is most closely connected. In this case, Contract No. 019 was signed in Shantou, China; the [Seller] has business office in China; and the [Seller]'s employee in its Chinese office signed Contract No. 019 on the [Seller]'s behalf. The People's Republic of China is therefore the country most closely connected with Contract No. 019 and the law of People's Republic of China shall be applied to this case. Furthermore, both the People's Republic of China and United States of America are Contracting States of the CISG, and the parties did not opt out of the application of CISG to Contract No. 019, therefore, the relevant provisions of the CISG shall be applied to this case. In addition, the parties chose CFR as the delivery term in Contract No. 019, so the relevant contents of INCOTERMS 1990 shall also be applied to this case as international practices and customs.

2. The Arbitration Tribunal has adopted the following facts:

(1) The shipping mark shown on Contract No. 019 is "GP97IA-035/No.1-UP". "GP97IA-035" represents the number of Contract No. 035.

(2) Inspection Certificate No. 440000/5780356 issued by Guangdong Inspection Bureau on 19 August 1997 indicates that China XXX Import & Export Company, Guangzhou Branch, which is the notify party and the consignee specified in Contract No. 019 applied to Guangdong Inspection Bureau for inspection of the goods with Contract No. 035.

(3) The letter of claim sent to the [Seller]'s Nanjing office by Mr. Wu, one of the [Buyer]'s employee, on 9 September 1997 shows that there were frequent business dealings between the parties. This letter mentioned three orders signed by the parties: 97CPSTI-(D)019, 97CPSTI-(D)021, and 97CPSTI-(D)022, which correspond respectively to another three contracts numbered GP97IA-035, GP97IA-033, and GP97IA-046. Disputes between the parties arose under all three contracts after the goods were delivered, and the [Buyer] made compensation requests to the [Seller] in the letter. With regard to Contract No. 019, the letter stated:

"97CPSTI-(D) 019(GP97IA-035) PVC200MT.

(1) There is a severe leakage due to improper packaging, which caused a loss of goods around 10 metric tons (amounting to US $7,900). In order to mitigate damages and at the request of Guangdong Inspection Bureau, a repackaging was done to the damaged bags at the expense of RMB 14,459.50 (amounting to US $1,740).

(2) There is a discrepancy in the type of goods. The shipping documents show the goods are F622 while the delivered goods are H622. The original end user rejected the goods because of the discrepant type. If an alternative resale is to be made, the price has to be reduced by RMB 1,000 (amounting to US $120) per metric ton, that is, the total reduction value will be US $24,000 (200 metric tons multiplied by US $120 per metric ton). We request a reduction in price as said before withdrawal of the goods. For this order, you should compensate us US $33,640."

Mr. Li, an employee of the [Seller]'s Nanjing office, replied to above letter by fax on the same day, in which he did not deny the fact that each order has two contract numbers. The contents of his fax are as follows:

"Dear Mr.Wu:

With regarding to your claim, two months have passed since the first batch of goods arrived at the port. In the light of this fact and under the directions from our headquarters, we think your claim comes too late to have our compensation possible. In order to make your claim valid, please send us the following evidence promptly:

1. Inspection Certificate;
2. Photos of the goods taken on site;
3. Your formal claim letter.

I will try my best to settle this issue as soon as possible, for the more delay, the harder to obtain a compensation ..."

(4) The [Buyer] submitted Contract No. 035 to the Arbitration Tribunal, the contents of which are totally in conformity with Contract No. 019 in terms of description of goods, specifications, unit price, price term, payment term, quantity, manufacturer, package, shipping mark, date of shipment, port of shipment, and port of destination, except for only the contract number and the name of buyer. Contract No. 035 was stamped with the common seal of China XXX Import & Export Company Guangzhou Branch and signed by Mr. Pu, an authorized representative of the [Seller].

(5) Inspection Certificate No. 440000/5780356 issued by Guangdong Inspection Bureau on 19 August 1997 shows: the buyer is China XXX Import & Export Company Guangzhou Branch; the seller is the [Seller]; the type of goods is PVC Suspension Resin F622; the inspected quantity and weight of the goods are 8,000 bags and 200 metric tons; the invoiced quantity and weight are 8,000 bags and 200 metric tons; the goods were shipped by HANJING BEIJING Vessel from Houston, USA to Huangpu, China; the discharging date is 16 July 1997; invoice number is 4811-1; the contract number is GP97IA-035; the B/L number is 6-97-625; and the goods bear no shipping mark. The inspection result indicates that the type of goods labeled on the packing bags is "H622" rather than "F622" required by Contract No. 035 and that the leakage of goods was caused by improper packaging.

(6) The [Seller] admitted that the packing bags were labeled "H622" instead of "F622". However, the [Seller] at the beginning of the hearing presented the Arbitration Tribunal with a written statement by the manufacturer, Formosa Plastic Corp., U.S.A., in which the manufacturer pointed out that "H622" and "F622" represent the same product, "F622" is the commercial name of PVC Suspension Resin, while "H622" represents the chemical components of PVC Suspension Resin and is used by the manufacturer as an indicator of production method rather than a type of goods, "H622" should not be considered as another type of goods different from "F622".

(7) The [Seller], as shipper, delivered the goods to UCL who issued one set of clean B/L numbered 6-97-625 to the [Seller] on 16 June 1997. This B/L reads: the consignee is to order; the notify party is China XXX Import & Export Company Guangzhou Branch; the vessel name and voyage are HANJIN BEIJING V05W; the port of shipment is HOUSTON, TX., U.S.A.; the port of discharge is Huangpu, China. The B/L also shows the name of the contact person as well as the telephone and fax number of the forwarding agent in Hong Kong and indicates that the delivery method is CY/CY (that means "from the container yard of Houston Port to the container yard of HuangPu Port") and that the description of packages and goods are PVC Suspension Resin F622 200 tons 8,000 bags contained in twelve 20-foot containers. On the rider page attached to the B/L are listed the number and the seal mark of the twelve containers and the number of bags in each container.

(8) UCL, as shipper, handed over the twelve containers holding the goods to HANJIN, who issued the B/L No. HJSCHOUA12405002 in Houston on 13 June 1997. This B/L shows: the consignee and notify party are GULF AGENCY COMPANY (Hong Kong) whose contact person is ANDY LAM; the goods were loaded onto HANJIN BEIJING 005W on 13 June 1997; the port of loading is LONG BEACH, CA and the port of discharge is Huangpu Port; the goods bear no shipping mark; and, for the container number and seal refer to the annex.

(9) JUNGJIN issued the B/L No. HKHP983127-09 on 13 July 1997 in Hong Kong. This B/L shows: the shipper was HANJIN; the consignee is to order of the holder of the original through B/L No. HJSCHOUA12405002; the notify party is Guangzhou XXX Service Co. Ltd., whose contact person is Ms. Chen; the vessel name & voyage are SUI HANG 983,127N; the port of loading is Hong Kong and the port of discharge is Huangpu, China; the goods are contained in twelve 20-foot containers and bear no shipping mark; the container numbers and seals are listed; the goods were shipped from HOUSTON via Hong Kong to Huangpu, China, and the name of the first voyage vessel is H. BEIJING V.005W. This B/L bears the "Seal Exclusively for Business Use" and the "Seal Exclusively for Release of Imported Goods" of China Overseas Transportation Company Guangdong Branch Hong Kong and Macau Division, the "Seal Exclusively for Forwarding Agent Use" of JUNGJIN, the "Seal of Customs Clearance " and the "Seal of Inspection" of Huangpu Customs of People's Republic of China, the "Seal Exclusively for Business Use" of Guangzhou Huangpu Business Development Co. Ltd; and a seal dated 24 July that states "the procedures for taking delivery of the goods have been completed."

(10) On 26 June 1997, Tim Southwell, an employee of UCL sent to Andy Lam / Mindy Szeto, employees of GULF AGENCY COMPANY (Hong Kong) a letter which states:

"REF: UCL 6-97-625
Please see the attached pages:
- UCL House B/L n/n + Rider
- 2/3 Master B/L Originals + n/n's
- ETA 7/15/97
Make certain cargo is not released until Original UCL B/L has been presented!!"

(11) On 3 July 1997, an employee of GULF AGENCY COMPANY (Hong Kong) wrote the following message on the blank space of the above letter:

"Hello, Ms. Cheng! We send you 2/3 original B/Ls issued by HANJIN as well as the forward B/L. Please contact the client in Guangzhou. The "To Order" under the forward B/L shall return 3/3 forwarder B/Ls to you."

This message was sent to Ms. Cheng of XXX Company by fax.

(12) A cargo manifest of the vessel SUI HANG 983 127N issued by JUNGJIN shows that the vessel sailed from Hong Kong to Huangpu on 13 July 1997 and carried three batches of goods, one of which is PVC Suspension Resin F622. The shipper, consignee, notify party, and numbers and seals of the twelve containers as well as transshipment records under the goods PVC Suspension Resin F622 in the cargo manifest were in coincidence with those showed in the B/L issued by JUNGJIN, as referred to in above (9). The Cargo manifest also indicates no shipping mark for the goods PVC Suspension Resin F622.

(13) The warehouse bill issued by Guangdong Huangpu Warehouse & Terminal Co. Ltd. indicates: the name of the vessel carrying the goods is SUI HANG 983; the goods were imported on 14 July 1997 under the B/L No. HKHP983127-09 (the B/L issued by JUNGJIN); the goods are PVC Suspension Resin F622 in 8,000 bags, 202,000 kilograms in weight, and twelve 20-foot containers in volume. The bill bears the "Seal Exclusively for Business Use" of Guangzhou Huangpu Business Development Co., Ltd. and the "Seal Exclusively for Business Use" of Guangdong Huangpu Warehouse & Terminal Co. Ltd..

3. Based on the evidence listed above, the Arbitration Tribunal reaches following conclusions:

(1) The evidence (1)-(4) reveals that the [Buyer] and the [Seller] concluded at least three transactions in the year 1997 and each transaction was represented with two different contract numbers. The [Seller] was aware of such facts and performed the contracts without any objection, nor did it produce any evidence to prove that such double contract numbers were made for illegal purpose.

(2) The [Seller] failed to produce any evidence proving that Contract No. 035 had been falsely or unlawfully made after it was submitted to the Arbitration Tribunal by the [Buyer].

(3) The faxes between the parties in connection with this case reflect that the parties contacted each other solely through the communications between the [Seller]'s representative Mr. Li in the [Seller]'s Nanjing Office and the [Buyer]'s representative Mr. Wu (the person who affixed his signature to Contract No. 019), either for giving notice of the vessel's departure time or for claiming compensation. The [Seller] had never contacted China XXX Import & Export Company Guangzhou Branch.

(4) The [Seller] admitted that the packages of the goods it delivered were printed "H662" instead of the "F622" required by Contract No. 019. The Inspection Certificates issued by the Guangdong Inspection Bureau indicates that the packages of goods the [Buyer] received under Contract No. 035 were printed exactly with "H662". Such facts show in an indirect way that the goods under Contract No. 019 are the same as those under Contract No. 035.

(5) The above evidence (5) reveals that the descriptions of goods, quantity, weight, invoice number, B/L number and other shipment information shown in the inspection certificates are totally in conformity with those shown in the shipping documents under Contract No. 019 presented by the [Seller], except that the number of the contract in the inspection certificates is 035 instead of 019.

All the above are enough to support the conclusion that the goods under Contract No. 035 are the same as the goods under Contract No. 019 and both parties are aware of this fact.

The Arbitration Tribunal noted that the price term under Contract No. 019 was CFR HUANGPU CHINA. Under the CFR term, the price offered by the seller includes the freight from the port of shipment to the named port of destination, and the seller must arrange the carriage of the goods to the named port of destination at its own expense, deliver the goods on board at the port of shipment within the period stipulated, give the buyer sufficient notice that the goods have been delivered on board without delay, and obtain and send to the buyer or buyer's agent by mail a clear B/L for the named port of destination.

In this case, the [Seller] contracted UCL as carrier for the carriage of the goods and obtained the B/L No. 6-97-625 issued by UCL in Houston on 16 June 1997. Mr. Li, the [Seller]'s representative in the [Seller]'s Nanjing office, notified Mr. Wu, the [Buyer]'s representative, of the departure time of the vessel on 24 June 1997. The [Seller] also sent to the [Buyer] the B/L No. 6-97-625 together with quantity/weight certificate, packing list and other relevant documents.

Since the B/L No. 6-97-625 provided by the [Seller] covered the whole voyage from the port of shipment to the port of destination, the contracting carrier, namely UCL, shall be responsible for the carriage of the goods for the whole journey by either carrying out the shipment by itself or contracting other carriers to carry out the shipment. The above evidence (8) and (9) show that UCL handed over the twelve containers to HANJIN and directed it to transport them from LONG BEACH, CA to Huangpu, China, while HANJIN handed over the goods to JUNGJIN in Hong Kong and directed it to ship the goods from Hong Kong to Huangpu, China. As to the discrepancies in the number affixed to the third container and the shipping mark entered in the different B/Ls issued during the course of shipment of the goods (the number affixed to the third container listed in the B/L issued by UCL is HJCU8930916 while in the B/L issued by JUNGJIN it is HJCU8900916; the B/L issued by UCL was entered with a shipping mark while the B/L issued by JUNGJIN was entered with no shipping mark), the [Seller] should account for. Notwithstanding the forgoing, the Arbitration Tribunal holds that such discrepancies are too inconsiderable to have a negative effect on taking delivery of the goods for the reason that the number of the seal of the third container and the numbers of the seal and container of the other eleven containers entered in the different B/Ls are exactly same. Therefore, it is impossible that, as claimed by the [Seller], the [Buyer] took delivery of the wrong goods.

After examining the documents submitted by the [Buyer], the Arbitration Tribunal holds: the above evidence (10) and (11) revealed that the [Buyer] exchanged the original B/L issued by UCL for the original B/L issued by HANJIN then exchanged the original B/L issued by HANJIN for the B/L issued by JUNGJIN, with which the [Buyer] took delivery of the goods and cleared the goods through Customs; the above evidence (13) revealed that the [Buyer] entrusted Guangzhou HuangPu Business Development Co. Ltd. to take the goods from the warehouse of Guangdong Huangpu Warehouse & Terminal Co. Ltd. and that the warehouse bill listed the number of each of the twelve containers and was stamped with the business seals of both the handing-over party and the receiving party, but failed to specify then existing conditions of the containers and the seals, and thereafter, the goods were transported to the Lan Stone Warehouse of China XXX Import and Export Company Guangdong Branch.

4. Regarding whether the [Seller] breached Contract No. 019

The [Seller] admitted that the packages of the goods it delivered were printed with "H622" instead of "F622" required by Contract No. 019. The [Seller] provided a statement issued by the manufacturer of the goods that "F622" and "H622" refer to the same product and that the former is the name of the goods used in business circle and the latter is the name of the goods used in internal production process, however, the manufacturer also acknowledged in the statement that "H622" should not be used in business dealings because it would cause trouble and confusion. The Arbitration Tribunal pointed out that the [Buyer] failed to produce evidence to prove that "F622" and "H622" were different products. Presuming that "F622" and "H622" represent the same product, the [Seller] should have given the [Buyer] a notice of such difference if it intended to deliver the goods with the packages printed with "H622" instead of "F622" required by the Contract. The fact is that the [Seller] failed to do so. Furthermore, the printings of "H622" on the packages of the goods were so apparent that that would have been found and corrected had the [Seller] inspected the goods properly before the loading or during the loading process. The [Seller]'s failure to do so resulted in the [Buyer]'s bewilderment and affected the [Buyer]'s resale of the goods to a third party. The [Seller] argued that under CFR the risk of loss passed to the [Buyer] at the time when the goods passed over the ship's rail at the port of shipment, so any damages or losses happened thereafter should be recovered from the carrier or the insurer. The Arbitration Tribunal holds that according to Article 35(1) of CISG which provides that "the seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract" and Article 36(1) of CISG which provides that "the seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time," as the printings on the packages of goods delivered by the [Seller] were not in conformity with Contract No. 019 and such lack of conformity existed before the goods were loaded on aboard of the ship at the port of the shipment, the [Seller] was in breach of Contract No. 019 and should be liable for the loss suffered by the [Buyer] there from.

As to the issue whether the goods were improperly packaged, the [Buyer] relied on the inspection certificates issued by Guangdong Inspection Bureau to claim that the loss from the leakage of the goods and the cost for the [Buyer]'s repackaging the goods were caused by the [Seller]'s improper packaging of the goods. The Arbitration Tribunal noted that Contract No. 019 prescribes that the goods shall be packaged with the manufacturer's 25-kilogram standard bags and in 20-foot containers. The [Buyer] failed to produce evidence to prove that the [Seller] violated this requirement, in addition, the B/L No. 6-97-625 provided by the [Seller] was a clean B/L. Article 25 of the Provisions of the People's Republic of China on Administration of Maritime International Container Transport provides that "When one party handed over a container to other party, both parties shall check the number of the container, inspect the condition of the container and seal. The heavy container shall be handed over only after check of the seal and the condition of the container ... After checking the number of the container, the condition of the container and seal, both parties shall make a record and sign their names on the record as a confirmation." Article 26 of the same provides that "The liabilities for the damages to or losses of containers or goods in containers, before the handing-over the containers or goods, shall be borne by the handing-over party, after the handing-over the containers or goods, shall be borne by the receiving party." Based on the analysis in 3 above, as no record was made by the handing-over party and the receiving party, the damages to the goods found after the goods were handed over shall be borne by the [Buyer].

5. Loss suffered by the [Buyer]

In accordance with Article 19 of the Foreign Economic Contract Law of the People's Republic of China, the [Seller] shall compensate the [Buyer] for the loss suffered by the [Buyer] as a result of the [Seller]'s breach of contract. The detailed calculations of the loss are as follows:

(1) Loss of price difference

Due to lack of conformity in the goods delivered by the [Seller], the [Buyer]'s end user, Guangdong Puning City Stone Bridge Daily Plastics Manufacturer, refused to accept the goods. The contract price between the [Buyer] and Guangdong Puning City Stone Bridge Daily Plastics Manufacturer was RMB 8,100 /ton. The [Buyer] had to resell the goods at a lower price, respectively, as follows:

- To NanhaiXXX Plasitics and Chemicals Company Ltd. 95 tons at a unit price of RMB 7,200 /ton;
- To Guangzhou Liwan District XXX Chemical Industry 10 tons at a unit price of RMB 7,200 /ton;
- To Gaoming City XXX General Company 54.425 tons at a unit price of RMB 7,100 /ton; and
- To Guangzhou Liwan District XXX Chemical Industry for additional 40 tons at a unit price of RMB 7,100 /ton.

All of the above resale transactions are evidenced by relevant contracts, B/Ls, and value-added tax invoices which have been accepted by the Arbitration Tribunal. The [Buyer]'s total loss of price differences amounts to RMB 193,582.50 which shall be compensated by the [Seller].

(2) Liquidated damages of RMB 81,000

Due to the [Seller]'s breach of Contract No. 019, the [Buyer] was unable to perform the contract with its end user, Guangdong Puning City Stone Bridge Daily Plastics Manufacturer, and had to pay the latter liquidated damages amounting to RMB 81,000. The payment of such liquidated damages by the [Buyer] is evidenced by the contract signed by and between the [Buyer] and the Guangdong Puning City Stone Bridge Daily Plastics Manufacturer and the receipt issued by the latter, which have been accepted by the Arbitration Tribunal. The [Seller] shall compensate the [Buyer] for such liquidated damages.

(3) Loss from the leakage of the goods and cost of repackaging

For the reason stated above, the [Seller] shall not be liable for the loss under this item.

(4) The Inspection fee

The inspection fee was a portion of the normal cost to be borne by the [Buyer] in deriving expected profits from the transaction contemplated under Contract No. 019. The [Seller]'s compensation for the [Buyer]'s loss of price differences includes the [Buyer]'s expected profits. The inspection fee shall therefore be borne by the [Buyer].

(5) Loss of interest

The [Buyer] claimed that the [Seller] should compensate it for the interest accrued on the above losses calculating from the date 9 September 1997 but failed to provide reasonable legal grounds for its calculation. The [Buyer]'s claim for loss of interest shall therefore be dismissed.

(6) The attorneys' fee

The [Buyer] claimed that the [Seller] should compensate it for the attorneys' fee of RMB 10,000, the payment of which by the [Buyer] was evidenced by the corresponding attorney-client contract and invoice. Pursuant to Article 59 of the Arbitration Rules, the Arbitration Tribunal holds that the [Seller] should compensate the [Buyer] for the attorneys' fee in the amount of RMB 10,000.

The Arbitration Tribunal also holds that 20 percent of the arbitration fee shall be borne by the [Buyer] and 80 percent by the [Seller].

III. THE AWARD

For the reasons stated above, the Arbitration Tribunal renders the following award:

1. The [Seller] shall compensate the [Buyer] for the economic loss and attorneys' fee amounting to RMB 284,582.50 within 30 days of the date of this award. For any late payment, 8 percent annual interest will be added.

2. The [Buyer]'s other claims are dismissed.

3. The [Buyer] shall bear 20 percent of the arbitration fee and the [Seller] shall bear 80 percent. The [Buyer] prepaid the arbitration fee of RMB XXX. Within 30 days of the date of this award, the [Seller] shall reimburse the [Buyer] RMB XXX, for any late payment, 8 percent annual interest will be added.

This award is final.

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FOOTNOTES

* For purposes of this translation, the Claimant of the People's Republic of China is referred to as the [Buyer] and the Respondent of the United States is referred to as the [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Fan Wei, LL.M candidate, New York University School of Law; LL.B., East China University of Politics and Law.

*** Tianhuai Yan, LL.M., Golden Gate University Law School; LL.M. Nanjing University Law School; Becon, Nanjing University Business School. Attorney at Law, admitted in P.R. China and California, USA; Partner, G & D Law Firm, Nanjing, China.}}

Source

Published in Chinese:
- Zhong Guo Guo Ji Jing Ji Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1999 vol., p. 1791-1803

English translation:
- available at Pace University CISG Website, http://www.cisg.law.pace.edu}}